Research › Search › Judgment

Delhi High Court · body

2001 DIGILAW 185 (DEL)

HINDUSTAN WIRES LIMITED v. RALSONS TYRES LIMITED

2001-02-13

MUKUL MUDGAL

body2001
MUKUL MUDGAL ( 1 ) THIS is an application, filed on behalf the defendant under Order XXXVII Rule 3 (5) Criminal Procedure Code, seeking leave to contest the suit. ( 2 ) THE suit is filed under Order XXXVII Criminal Procedure Code for recovery of Rs. 18,12,642. 50. 00 alongwith pendente lite/future interest and costs of the suit. ( 3 ) THE plaint avers as under:- ( 4 ) THE suit is based upon the recovery of the price of material supplied by the plaintiff to the defendant from time to time. Consequently by a Reconciliation Certificate dated 8/05/1996 one Shri P. S, Khullar, General Manager (Accounts) on behalf of the defendant-Company admitted that the balance payable to the plaintiff was Rs. 14,54,351. 14. This balance acknowledged to be due as on 31. 3. 1996 comprised of rs. 11,09,743. 00 by way of principal amount and Rs. 3,44,608. 14 on account of interest. Thereafter one Shri Satish Arora, Asst. Manager (Accounts) of the defendant- company by a Reconciliation Statement showing dues as on 31. 1. 1997 admitted that the balance payable to the plaintiff was Rs. 11,09,743. 00 plus Rs. 4,83,840. 53 on account of interest totally Rs. 15,93,583. 55p. In spite of Demand Notice dated 14. 5. 1997 for the above amount sent by the plaintiff to the defendant, no steps were taken by the defendant to repay the amount acknowledged as due. The plaintiff has claimed interest @ 19% per cent as per the Agreement between the parties. Plaintiff has further claimed that the amount said to be recovered is debt or liquidated demand in money payable by the defendant arising out of the written agreement, i. e. , the Reconciliation Statement issued by the defendant and consequently the suit was being filed under the Summary Procedure prescribed by Order XXXVII Criminal Procedure Code. It is averred that no relief which does not fall within the ambit of Order XXXVII Criminal Procedure Code has been claimed in the plaint. ( 5 ) UPON being served with the summons for Judgment the defendant filed an application, IA. 5930/99 for leave to defend. Apart from pleading lack of territorial jurisdiction which was not pressed at the time of arguments, it was claimed that Order xxxvii does not apply to the facts of the present case. ( 5 ) UPON being served with the summons for Judgment the defendant filed an application, IA. 5930/99 for leave to defend. Apart from pleading lack of territorial jurisdiction which was not pressed at the time of arguments, it was claimed that Order xxxvii does not apply to the facts of the present case. In fact the plea of territorial jurisdiction is anyway not maintainable because the jurisdiction is to be judged on the pleas made in the plaint and it is clearly averred that the defendant has its principal place of business (Head Office at Delhi) and has also works from Registered Office situated at Delhi. In fact the letter-head of the defendant (Annexure-A) clearly shows that the head office of the defendant is at New Delhi. It is further stated that an alleged reconciliation Certificate dated 8. 5. 1996 or the reconciliation statement of dues upto 31. 1. 1997 are neither bills of exchange nor promissory notes and cannot also amount to written contracts under the Contract Act and are also not a guarantee. It is further stated that the triable issues raised by the defendant are:- (I) That the claim for interest which is not based on any Agreement or any specific agreement which is in dispute then the same itself is a triable issue as per the law laid down in Corporation Bank Vs Montana International and offers. 1995 (32) DRJ 438 ; (II) That Shri P. S. Khullar, General Manager (Accounts) who has allegedly signed the Reconciliation Certificate dated 8. 5. 1996 and Mr. Satish Arora, asst. General Manager (Accounts) who has allegedly signed the Reconciliation statement for dues as on 31. 1. 1997 were never an employee of the defendant- company. In support of this a statement issued by the Auditors of the company has been filed stating that neither Mr. P. S. Khullar nor Mr. Satish arora had an actual, ostensible or accrued authority to issue any reconciliation certificate/statement on behalf of the defendant-Company. It is said that both were never agents nor employees of the defendant-Company and this was not alleged in the plaint. Hence question does not arise for either Mr. Khullar or Mr. P. S. Khullar nor Mr. Satish arora had an actual, ostensible or accrued authority to issue any reconciliation certificate/statement on behalf of the defendant-Company. It is said that both were never agents nor employees of the defendant-Company and this was not alleged in the plaint. Hence question does not arise for either Mr. Khullar or Mr. Arora to issue any reconciliation certificate or reconciliation statement; (III) That the Articles of Association of defendant-Company authorizes only the Director of the Company to borrow money or make admissions on behalf of the defendant-Company and neither Mr. Khullar nor Mr. Arora are alleged to be the Director or the authorized person to issue a statement on behalf of the defendant-Company; (IV) That the alleged Reconciliation Certificate and Reconciliation Statement are also fabricated and forged and the forgery is said to be committed by the company with or without the involvement either of Mr. Khullar and Mr. Arora; (V) That the filing of documents running into 50 pages by the plaintiff as a reply to the application for leave to defend the suit itself shows that these are triable issues and leave to defend ought, therefore, be granted. (VI) In support of the above pleas, reliance has been placed on the judgments reported as Sunil Enterprises and Another Vs SB/ Commercial and international Bank Ltd. 1998 5 SCC 354 -356; Mechalec Engineers and manufacturers Vs M/s Basic Equipment Corporation 1976 4 SCC 687 ; santosh Kumar Vs Bhal Moot Singh AIR 1958 SC 321 ; Standard Charterd bank Vs Mr. M. S. Handa and Others 1993 (25) DRJ 538 ; Corporation Band vs Montana International and Ors. 1995 (32) DRJ 458 and Nairs Arkimentals (P) Ltd. Vs New Delhi Hotels Ltd. 1992 (22) DRJ 199 . ( 6 ) IT is stated that on the basis of the position of law laid down in the above judgments, the defendants have raised a triable issue and ought to be granted leave to defend. It is also contended that the defendant has a fair, bonafide and reasonable defence and is, therefore, entitled to unconditional leave to defend the suit. ( 7 ) THE following passage from Sunil Enterprises (Supra) has been relied upon in particular: "4 (a) If the defendant satisfied the court that he has a good defence to the claim on merits, the defendant is entitled to unconditional leave to defend. ( 7 ) THE following passage from Sunil Enterprises (Supra) has been relied upon in particular: "4 (a) If the defendant satisfied the court that he has a good defence to the claim on merits, the defendant is entitled to unconditional leave to defend. (b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence, although not a possibly good defence, the defendant is entitled to unconditional leave to defend. (c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiff s claim, the court may impose condition s at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment into or furnishing security. " ( 8 ) THE plea of the plaintiff is that claim is based on balance confirmation/reconciliation statement which amounts to an acknowledgment of accounts and which is in writing as per the law laid down in Daya Chand Uttam Prakash Jain and Another Vs santosh Devi Sharma 67 (1997) DLT 13; Elvira Rodrigues Vs Godnicalo Hypolito constancio AIR 1934 Privy Council 144 and Gharabharan Vs Sri Radha Kishan and Others AIR 1958 Allahabad 313 (DB ). ( 9 ) IN reply to the plea of the defendant/applicant that neither Mr. P. S. Khullar nor Mr. Satish Arora was an employee of the defendant-Company, the plaintiff has relied upon the documents filed alongwith the reply to the application for leave to defend. In particular, reliance has been placed upon a debit note issued by the defendant with the consent of the plaintiff which has not been honoured and has been left out of the reconciliation Statement and this amounts to Rs. 14,54,351. 14. Furthermore the amounts paid by the defendant have been credited by the plaintiff to the tune of Rs. 1,00,000. 00 plus Rs. 1,00,000. 00. Several documents have been filed by the documents signed by Mr. Khullar date from 1993. In fact the aforesaid documents signed by Mr. Khullar start from 17. 9. 1993 and go right upto the Reconciliation Statement. Previously also Reconciliation Statements were issued by Mr. Khullar. 1,00,000. 00 plus Rs. 1,00,000. 00. Several documents have been filed by the documents signed by Mr. Khullar date from 1993. In fact the aforesaid documents signed by Mr. Khullar start from 17. 9. 1993 and go right upto the Reconciliation Statement. Previously also Reconciliation Statements were issued by Mr. Khullar. Significantly some of these documents are the originals of statutory C-Forms issued by Shri Khullar signed as a Director and authorised signatory of the defendant on 15. 06. 1995 under the central Sales Tax Act. ( 10 ) A perusal of the above documents clearly shows that the defendant s case that neither Mr. Khullar nor Mr. Arora was an employee or authorised to correspond or acknowledge on behalf of the defendant is an afterthought prima facie lacking in bonafides and is clearly an attempt to wriggle out of the obligations arising out of the reconciliation Statement. The plea that only a director of the Company could make admissions is also negated by Khullar s signing C-Forms as a Director of the company. ( 11 ) THE above documents also demonstrate that right from 1993 several documents have been signed by Mr. Khullar in his capacity as General Manager (Accounts ). The other documents are contemporaneous documents such as the statutory C-Forms. No satisfactory explanation has been given by the applicant/defendant regarding the above documents except for urging that the large number of these documents filed are in themselves sufficient for grant of leave to defend. This in my view is a wholly untenable plea. Just because the plaintiff relies upon a plethora of documents which advance its case, the defendant cannot be granted unconditional leave to defend All the documents disputed by the defendant, which are signed by Mr. P. S. Khullar and mr. Satish Arora are on the letter-heads of the defendant and while terming the documents as possible forgery no plausible reason whatsoever has been given by the defendant/applicant why the documents are forged or how Mr. Khullar and/or Mr. Arora had access to such letter-heads. Furthermore in the rejoinder the only significant plea taken by the defendant while replying to the effect of the documents signed by mr. Khullar/mr. Arora and relied upon by the plaintiff, is that Mr. Khullar and Mr. Arora never had actual, accrued or ostensible authority to issue any Reconciliation statement. Khullar and/or Mr. Arora had access to such letter-heads. Furthermore in the rejoinder the only significant plea taken by the defendant while replying to the effect of the documents signed by mr. Khullar/mr. Arora and relied upon by the plaintiff, is that Mr. Khullar and Mr. Arora never had actual, accrued or ostensible authority to issue any Reconciliation statement. This clearly is a frivolous plea because if this was so Mr. Khullar could not have issued the statutory C-Forms. Furthermore the mere Certificates of the Auditor dated 9th of November, 1998, certifying that Mr. P. S. Khullar and Mr. Satish Arora were not the employees of the defendant-Company nor authorised to issue any reconciliation statement are obviously self-serving documents and cannot be given any credence whatsoever. No logical basis for issuing such negative certificates been indicated in the said Auditor s Certificates. All that the Chartered Accountan. Certificates state are that Mr. Khullar and Mr. Arora were neither an employee of the defendant-Company at present nor were an employee at any time earlier and this information was verified from the records of the defendant-Company and as per informations and explanations given to us by the Company. It is not possible to accept a plea of the defendant based on this document which does not even state as to what, if any, record was looked at and what information and explanation was sought for by the Auditors from the Company. Furthermore the plea that the reconciliation statement falls out of the ambit of Order XXXVI I of Criminal Procedure Code is bareless. It is not in dispute that the reconciliation statement is a contract in writing. In Daya chand Vs Santosh Devi 67 (1997) DLT 13 acknowledgement has been held to be a written contract. The above decision applies squarely to the facts of the present case. ( 12 ) IN Mechalec Engineers and Manufacturers Vs M/s Basic Equipment corporation 1976 (4) SCC 687 the following position of law has been laid down: "in Smt. Kiranmoyee Dassi Vs. Dr. J. Chatterjee AIR 1949 Cal 479, Das J. , after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 17 Criminal Procedure Code. Dr. J. Chatterjee AIR 1949 Cal 479, Das J. , after a comprehensive review of authorities on the subject, stated the principles applicable to cases covered by Order 17 Criminal Procedure Code. in the form of the following propositions: (a) If the defendant satisfies the court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend. (b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend. (c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff s claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the court may in its discretion impose conditions as to the time or mode of trial but not as to payment into court or furnishing security. (d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend. "( 13 ). The pleas of the defendant raised in the application for leave to defend thus clearly amount to a moonshine and mala fide attempt to avoid the liability of acknowledgments made by two of its senior employees/directors and clearly show that the defendants have neither a fair nor a bona fide or nor a reasonable defence and are, therefore, not entitled to unconditional leave. ( 14 ) I am, therefore, of the view that in view of the foregoing discussion this case falls within the ambit of law laid down by Mechelec Engineers case (Supra) at (d) and the defence of the defendant is moonshine and accordingly I am of the view that the the defendant can be granted leave to defend only upon deposit of sum of Rs. 14,54,351. 14 which is the principal amount reflected in the Reconciliation Statement dated 31. 3. 1996 given to the plaintiff by the defendant alongwith letter dated 8. 5. 1996. ( 15 ) THEREFORE, prima facie in so far as quantum of interest is concerned the plaintiff has not been able to show how 19% per cent interest can be charged without trial. I am of the view that the defendant is entitled to leave to defend only on the question of quantum of interest as the plaintiff has not disclosed on what basis the interest has been claimed @ 19% on the sum of Rs. 15,93,583. 55. Accordingly, I am of the view that the defendant is entitled to grant of leave to defend the suit, subject to the deposit of sum of Rs. 15, 93,583. 55 in this Court within four weeks from today. ( 16 ) THE application is accordingly disposed of. Suit No. 139/98 ( 17 ) WRITTEN statement be filed within four weeks from today. Replication, if any, be filed within three weeks thereafter. ( 18 ) ORIGINAL documents, if any, alongwith list of witnesses be filed within six weeks from today. Thereafter the matter be list before the Joint Registrar on 23. 4. 2001 for admission/denial and scrutiny of documents.